Spirituality and Organizational Life: Reflections on a 30-Year Experiment

Reell Precision Manufacturing

by Bob Wahlstedt
From “The Bridge: Field notes for seeing things whole, Spring 2000, Retrieved from
http://www.seeingthingswhole.org/images/Spring00.pdf

… RPM co-founder Bob Wahlstedt reflects on his company's journey of intentionally shaping its
organizational life in light of explicit core values and religious roots.

I met Dale Merrick and Lee Johnson in the 50s when we were all engineers at 3M. In 1960, Dale left 3M to
start a manufacturer's rep business. I joined him in 1963, and Lee joined us in April of 1970, we started our
manufacturing business in October of the same year.

Since this business was going to produce clutches, which related to rotation, we chose the initials "RPM"
before we had figured out what the "R" meant (we were comfortable with "Precision Manufacturing" for
the "PM"). After going through the entire "R" section of the dictionary without finding the right word, Lee
began looking through a German dictionary, and found the word "Reell," which means "honest, dependable
or having integrity." With the discovery of this word, we agreed that our new name, Reel Precision
Manufacturing, was the perfect name to express the ideals of our new business.

These were not the best economic times for beginning a new venture, and the early years were very
challenging. However, we were able to develop an improved clutch device that competed well, obtained a
patent on our innovation, and in 1972 3M became our first customer.

Our Vision

In addition to the experience of having worked at 3M and an entrepreneurial interest in precision

manufacturing, early on the three of us had identified three things that were personally important to
us: the need to maintain a source of income; a desire for personal growth; and the opportunity to integrate
our spiritual life with our work. A commandment from our own faith tradition — love your neighbor as
yourself — led us to assume that all of our employees would want these same things. So we set out to
shape a company that would provide for everyone these things that were most important to us. This basic
commitment has led to a few innovations over the years.

Employment Security

We faced a major challenge in 1975, and our wrestling with this challenge formed a significant
philosophical pillar of Reell. During that year, drastically reduced sales made it obvious that the
payroll could not be supported without incurring an unacceptable level of financial loss. The prevailing
business wisdom suggested that an appropriate response to this challenge would be for RPM management
to "bite the bullet" and make the difficult decision of who to lay off in order to reduce our payroll
obligation.

Prayer and discussion led to a unanimous agreement to chart a different course. Instead of laying off some
of our employees, all employees were asked to take a 10% reduction in time worked or salary. (Actually,
the three of us took a much larger cut.) Before the year was out, this reduction had to be increased to 20%!
By sharing the responsibility, we were able to avoid letting anyone go. Although RPM's commitment to
people would be tested again in later years, this marked the beginning of our philosophy that makes the
security and growth of employees the highest priority of the company. More recently, in 1998, we faced a
similar challenge, and all of us, excepting the lowest paid people, took a 10% pay cut for 4 months in order
to break even.

HUMAN ERA / Behavioural

TET (Teach-Equip-Trust) Calculating / Management Science

In 1983, we faced another problem which led to revolutionary changes in our people relationships within
the company. As with many revolutions, it didn't seem like a revolution at first. We simply had a problem
to solve.

Our set-up procedures on the manufacturing floor called for an independent evaluation of set-up samples by
Quality Control after the set-up was complete and before the job was run. When the set-up was finished,
the set-up person would submit samples to Quality Control, and it would usually take several hours before
an inspector was free to do the required evaluation. Of course, by this time the setup person had turned his
or her attention to the next job. Consequently, if the samples were not satisfactory, more time would elapse
before the adjustments could be accomplished. In some cases, this process would have to be repeated
several times before the job was approved. Understandably, the folks in manufacturing found this
frustrating because they would set up a job and not be able to actually run it until several days later.

Someone asked the question, "What if we taught the set-up people to do their own inspection and trusted
them to do it right?" At this time we had no objective in mind other than to improve the efficiency of the
set-up procedure. We decided to buy a complete set of inspection tools for the set-up people and assigned
one of the quality control inspectors to the manufacturing department to teach set-up people inspection
techniques. This would allow the set-up person to stay on the job, without interruption, until it was ready to
run.

The results were surprising. Not only did we achieve the expected improvement in efficiency, but the
quality of production improved. This was the first step in a philosophical evolution from a Command-
Direct-Control style of management (CDC) to a Teach-Equip-Trust (TET) way of managing. By
teaching the set-up people in inspection procedures, equipping them with inspection instruments, and
trusting that they would do things right, greater productivity, better quality and growth for the
individual were all achieved.

This positive but limited experience with the benefits of trusting people prepared us for even more
significant improvements when we were exposed to training in Statistical Process Control (SPC) and Just-
In-Time (JIT) provided by a major customer. These new techniques were exactly what was needed to allow
us to extend our Teach-Equip-Trust philosophy to our entire manufacturing operation. This change was
truly revolutionary! Previously our assembly process required five weeks making, inspecting and stocking
subassemblies and final assemblies. Now, all subassemblies and inspections are done in one continuous
flow process by production people. The entire process takes less than two minutes and the finished unit is
ready for shipment without further inspection when it comes off the assembly line! In fact, it is placed
directly into the shipping carton.

As promised by the proponents of JIT, we have experienced the positive financial effects of reduced
inventory, inspection and assembly costs along with better quality and better utilization of space.

More importantly, assembly positions are enriched. Assemblers can move up in responsibility and pay to
Senior Assembler and Line Leader positions as their skills increase through training and experience.

This experience—this revolution has shown us that the biggest misconception of American manufacturers
is the belief that production workers are not dependable and must be motivated and/or constrained if they
are to do quality work. We have been amazed at the selfmotivation and dedication to quality and
productivity that our people demonstrate when they are freed to develop and use more of their potential.

ESOP

In 1985, with Dale approaching retirement and both Lee and me only a decade or so away, an Employee
Stock Ownership Plan (ESOP) was established for the purpose of transferring some of the ownership of the
company to its' employees. In 1990, the ESOP held a little more than 30% of RPM stock. In this way, all
employees share in the success and growth of the company.

We are often asked about our ESOP by other companies who are thinking of establishing one. I always ask,
"Why do you want an ESOP?" Many times the answer has only to do with tax savings. Although there are
tax benefits, I always tell them that this is not a good reason to have an ESOP.. It the owners of the
company do not truly believe that the employees deserve to have a "stake" in the business and share in the
benefits of growth, the ESOP is being misused and will probably not be successful.

Target Wage

In 1988, one of our advisors came to the three senior managers and reported that production people were
saying that they liked everything about working at RPM except the pay. This led to a meeting of our
"management committee" in which someone asked, "How much does it take to provide an 'adequate'
standard of living for a typical family?" We agreed on a target wage of $18,000 per year and instituted a
policy by which all "satisfactory" co-workers would be raised to that level within five years regardless of
the "market value" of the job. In the twelve years since 1988, our target wage has increased to $23,899, and
most co-workers reach that level in 2-3 years.

Each of these instances represents an attempt on our part, to bring to practical expression in our company
the Judeo-Christian values which we shared. Most often, we did this quite intuitively. It wasn't until I came
across writings by Michael Naughton on the Catholic social thought tradition that I discovered that we had,
without realizing it, put into practice the principles of participation, subsidiarity, common use, and justice.

The richness of this experience has left us with a bone-deep conviction about the importance of inviting our
co-workers to bring all of the resources with which they are endowed to our common life at RPM.
Moreover, it has led to a growing desire to explore ways of inviting our employees to actively draw on not
only their physical and intellectual abilities, but also on the wisdom which emerges from their own personal
religious and spiritual traditions as a resource to enriching and strengthening our ongoing life together as an
organization. We know from our initial attempts that this invitation for our employees to bring their "whole
selves" to work in this way is not without surprises, complications, and occasional discomforts. We believe
it's worth the risk, though.

I like something Steve Wikstrom, our Co-Executive Officer, said several years ago about this spirit of
adventure. He said, "If you asked people around here 'What's the worst thing that could happen?', going out
of business would not be the number one response. I believe they would say, to abandon the true north that
we have defined on our compass. If we were to abandon that, I know the people I work with would say,
'Pull the plug on it and walk away. It's not that important to us.'"

If you asked people around here "What's the worst thing that could happen?", going out of
business would not be the number one response. I believe they would say, to abandon the true
north that we have defined on our compass. If we were to abandon that, I know the people I work
with would say, "Pull the plug on it and walk away. It's not that important to us."
Steve Wikstrom, Reell VP